Wednesday, February 06, 2013

Regardless of the need for reform, it isn't going to happen for these structural reasons.

The list of public/private institutions that desperately need structural reform is long: the Pentagon, healthcare (a.k.a. sickcare), Social Security, the complex mish-mash of programs that make up the Welfare State, the 73,000 page tax code, public pensions and the financial sector, to name just the top few.

Every reasonably informed person knows that all these institutions need deep, systemic reforms, not another layer of bureaucratic oversight or a few policy tweaks. As evidence that the Status Quo is finally confessing to the obvious, please read Can America Be Fixed? The New Crisis of Democracy by Fareed Zakaria (Foreign Affairs).

The article lays out the unsustainability of current public/private institutions and policies in irrefutable detail.

Regardless of the need for reform, it isn't going to happen for these structural reasons.In a nutshell, the public-relations America presented by the mainstream media and the State bears little resemblance to the actual machinery of finance and governance.

1. Elections have become the means to control the redistribution of national wealth to politically powerful cartels and constituencies rather than the pathway to good governance. Good governance gets abundant lip-service (propaganda supporting the flimsy facade of PR America), but American government has by and large lost the institutional memory of actual (as opposed to PR) good governance.

We might use the career of Paul Volcker as a window into what has been lost. As Austan Goolsbee writes in his review of Volcker: The Triumph of Persistence by William L. Silber:"Volcker still believes that public service is the most important thing someone can do, but he fears that this attitude may be a relic of a bygone era."

Why be coy? In a nation of revolving doors between public service and fat-cat corporate lobbying positions, it is decidedly a relic of a bygone era.

As Mr. Zakaria observes, "The system works better as a mechanism for campaign fundraising than it does as an instrument for financial oversight."

This institutional corruption and loss of good governance cannot be repaired in a single election, and it renders real reform impossible.

2. In a bought-and-paid for democracy like America's, vested interests protect their perquisites, power and share of the swag/national income regardless of the costs to the economy and society at large. This perversion of "national interest" to serve provincial, neofeudal fiefdoms necessarily leads to the real national interest being subverted and sacrificed on the altar of expediency and protection of the Status Quo at all costs.

In a bought-and-paid for democracy like America's, it is impossible for a government whose first priority is serving and maintaining vested interests to assert the national interest if that requires dismantling the vested interests' power and share of the swag.

3. This feeds a self-reinforcing feedback loop of political expediency. Since real reform requires cutting the perquisites and swag of self-serving fiefdoms and crony-capitalist cartels, phony "reforms" are passed in a purposefully obscure flurry of complex legislation that leaves all the real work to regulators who are politically in thrall to the very interests they are supposed to regulate.

These simulacra reforms feed the PR need to "do something to fix the problems" while doing nothing but extending the Status Quo and making the problem's next crisis that much worse.

Here is the perverse feedback loop: when the next crisis hits, the cuts to the Aristocracy's fiefdoms and constituencies would need to be even deeper and are therefore even more repellent, so real reform is even more impossible than in the initial crisis. Another round of toothless, hyper-complex regulation is hurriedly enacted, erecting a Complexity Fortess around the parasitic fiefdoms and cartels.

4. The political, corporate/financial and National Security State Elites represent a vanishingly thin layer of the American economy and society. America today is the nightmare scenario feared by James Madison and other Federalists: a covertly created monarchical (what I term neofeudal) empire much like the Roman Empire--a republic in name but in reality a highly centralized Empire operated for the benefit of tiny Elites who buy complicity of the masses with free bread and circuses.

The "Monarchical Federalists" Madison and Jefferson feared have indeed established a neofeudal, neocolonialist Empire.

In this context, it is interesting to note that fully 20% of all entitlements (tax credits, Medicare, Social Security, etc.) flows to the top 10%, 50% goes to middle-income households and 30% goes to the bottom 20%. The swag of bread and circuses is remarkably well-distributed, buying off every sector of the populace.

5. Behind the PR facade of democracy and free-market capitalism, a parasitic Aristocracy extracts income and wealth from a financially indentured class of serfs. This Aristocracy is composed of several Elites which are served by what I term the Upper Caste of technocrats (prep-school/Ivy League graduates who enter technical/managerial service in key institutions, plus a handful of officers brought up through the service academies and war colleges).

These Elites and the Upper Caste serve each others interests, a social heirarchy that Hilton Root characterized as a "society divided into closed, self-regarding groups." The slow trickle of the "best and brightest" into the Upper Caste via Ivy League university admission is also a propaganda facade, as Ron Unz ably and exhaustively proves in The Myth of American Meritocracy How corrupt are Ivy League admissions?

The trick is enable just enough meritocracy to support the PR facade. The Ivy League has mastered that balancing act.

These Elites have few if any links to the social layers below. Charles Murray spoke to some aspects of this trend of financial/social Elitist isolation from the debt-serfs and middle managerial class below in Coming Apart: The State of White America, 1960-2010, but the key dynamic that is outside Murray's sociological purview is the stark reality that the Elite class is devoid of any real feeling for or interest in the common good or public weal.

That is, not only have the key institutions of American governance and power lost the memory and mechanics of good governance, the Elites running the institutions have become an inbred neofeudal Aristocracy characterized by an unexamined (and thus deeply adolescent) sense of entitlement to the reins of power and control of the national income.

It's not just the institutions that have lost any conception of good governance-- the Aristocracy ruling the nation has lost all interest or recognition of the common good.This is of course not unique to America; the same disregard for the common good is at the root of Greece's status as a failed state.

The incestuous embrace of privilege and power by protected, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history. It is painful to recognize that this is precisely what America has become: a failed state that refuses to admit to its institutional failure because that would require the recognition of a neofeudal, neocolonial Empire ruled by a small, self-serving, parasitic political and financial Elite.

There is one last dynamic that has yet to unfold: the disconnected, protected and politically incestuous Elites at the top of the monarchical Empire recognize the need for real reform at the last minute, when it is too late to effect repairs on a rotten-to-the-core and bankrupt State.

America may be as long as a decade away from this final recognition and frenzied rush to reform what has already been destroyed by self-serving Elites and parasitic, parochial fiefdoms.

One key element in this dissolution of the corrupt regime is the wholesale abandonment of the Elites by the managerial class which belated grasps its role as enforcers of the parasitic class and accepts that its naive aspirational ties to the Elites were illusory: When Belief in the System Fades (March 12, 2008).

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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